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Early last week we touched upon whether the indexes were going to trace out an ABC Pullback Off Highs (POH) or whether it was going to be an ABCDE Pullback Off Highs. One look at the index charts below and you no longer need to ask which.
First up here are the 60 minute time frequency charts for your viewing pleasure.
Full Stoh’s right back to oversold.
Moving on to the daily charts
Notice how we are sitting at downtrend channel support here too (Pink Lines) for the most part?
Another thing we want you to key in on is that of the blue support zone, sure we broke it, however we’ve also got the ABCDE (same thing as 5 waves down). So at first glance seeing as how we broke the blue support zone should we freak out and sell sell sell? Should we jump to a conclusion immediately?
Well before we answer that question lets back up a moment and shift to what I do when I see markets getting hammered in pre market (Remember gaps are events over which you have no control over anyway as you never know when they are coming).
When I see markets are going to open down the first thing I do is I DON’T REACT! The second thing I do is I let the opening nervousness settle down then I look at my current holdings to see exactly what they are doing/showing technically speaking. This is what we mean when we say "Let Your Stocks Tell You What To Do By The Action They Are Exhibiting"
I look at technical supports , I look at how much am I down on the position on its own, but never really need to freak out because of trade size risk management. So you see, as always trade size risk management saves you ALL the time and allows you to never have to concern yourself with am I getting hammered? More often than not a bad day for you is that of a little spilled coffee on yourself.
Case in point a good example of why we don’t want to jump to conclusions immediately is that of IRBT. Last week this issue broke its uptrend and at one point we were underwater to the tune of about 8% on the position on its own.
Today this issue has rallied right back up to the 50 day and here we are at break even again. This is exactly why we don’t jump to conclusions. Had we jumped to a conclusion on the break down? We’d have taken a loss, now? breakeven to slightly ahead. Folks it doesnt happen all the time but more often than not for us it has. The phrase that comes to mind is "Its more of an art than it is a science".
Another mini case in point today was that of AAPL, this issue instantly sold off to the 329.42 level and immediately caught a big and is now in the 333.40 level?.
So, was being a nervous nellie and REACTING to a down open (after it was already down mind you) by selling the right thing to do this morning? Apparantly not. Besides, we’ve talked about this area being a support zone too and the phrase that comes to mind is that of "In the face of fear". Heck that was good for 4 points already today to the trader low to highs.
To sum it up? We’ll do nothing here but focus upon our holdings and the longside names on our watch list. Simple as that.
If we do anything today (and we probably will) its we are going to do what we said we’d do and that is sell IRBT on strength. Expect a walking away trade trigger today with this issue.
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Short Side Coming Attractions
With the indexes near support, an upward bias holiday week pending and new long side set-ups debuting on our watch list, the long side is our focus this week.
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LONG SIDE WATCH LIST If I were to put money to work here. Where do I put it?
Only The Best And Forget The Rest
We have a few new names setting up. Remember the name of the game is Pullback Off Highs (POH) as they are the only pattern you’ll ever need.
All the conditions are ripe here — stohcastics oversold (blue circle) and near support at the blue line. A break above the pink line triggers a long side trade.
ILMN
Let’s keep an eye on it as it nears support at the bottom of the upward trend channel (green line).
ABV
We’d prefer to see it continue to pullback towards support at the blue line/50-day.
ACOM
May also still have some work to do to get closer to the 50-day and the full stohcastics closer to oversold territory.
5-23 With all of the above you can see they are all still in Pullback Off Highs (POH) mode hence there is nothing to do but watch for the time being.
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FEATURED BUT NOT TRADE TRIGGERED BY US
This is where names that we have on our watch list that have triggered but for whatever reason we did not take them (can’t do them all) in our trade trigger alerts. This section is because a lot of our subscribers opt to use our information as they see fit from a do-it-yourselfer standpoint.
Long side
OXY
All the conditions are ripe here. At support and well oversold
GLD
Bounced off of the green trend line.
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All About Options In The World According To All About Trends
NOTE: The exchanges recently started WEEKLY EXPIRATIONS of options. Going forward, make sure that you check to see which ones you are buying. Let’s stay with traditional options expirations which are the ones that expire the 3rd Saturday of every month.
Options Watch List
ALL JUNE Expiration from here on out folks
Current Holdings
CAT (We are now long 2 JUNE 95 call options to open at 11.10)
As we post they are currently at 7.30
AAPL (We are now long 1 JUNE 320 call option to open at 22.30)
As we post they are currently at 16.85
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"Let Your Stocks Tell You What To Do By The Action They Exhibit"
LONG SIDE POSITIONS
LULU (We are LONG 150 shares at 94.29 as of 5-17-11)
IPGP (We are LONG 200 shares at 63.94 as of 5-17-11)
5-23 Pulling back with indexes today, uptrend still intact. We may though consider a retest of friday’s highs as a walk away and lock gains zone though.
PLCM (We are LONG 200 shares at 54.65 as of 5-17-11)
Retesting support at the blue line and 50-day with the stohcastics well oversold.
AAPL (We are LONG 50 shares at 338.15 as of 5-5-11)
Call it "In the Zone" Again.
CAT (We are LONG 150 shares at 105.15 as of 5-5-11)
5-23 Well much like the Dow so goes CAT. See the 5 waves down (abcde) on positive RS divergence by a smidge? So do we really want to walk away here? With 5 waves down showing? With a lousy 3/10’s of a loss impact to the whole virtual portfolio compliments of trade size risk management or? Just remember gaps work both ways, big gaps up this goes up with it.
IRBT (We are LONG 300 shares at 32.15 as of 5-5-11)
Shown above.
5-23 Hmm from our notes of 5-18 We went from a small loss, to a wash to now a small gain all because WE DID NOT freakout when it broke down and waited till it bounced. We will be walking away from this one most likely today. By not freaking out when it broke down we have an extra 600.00 to show for it vs a few days ago. That’s how you manage difficult times folks.
As we said on 5-18, bouncing off the lows with the markets, let’s see if we can go from the 3rd best outcome of a small loss to a wash. Then if we get to wash mode we’ll make a decision as to whether we want to hold for a gain outcome.
INFA (We are LONG 200 shares at 51.44 as of 5-5-11)
5-23 Well at this point this issue is still intact. There is a good possibility we’ll walk away on strength though in the near future, a retest of the highs from friday? Sure.
5-22 At resistance, but still a few points away from trend channel resistance. Let’s see if we can get another few points on this issue before we lock in our gains.
5-23 So all in all per our comments at the begining of this update and per the "Let your stocks tell you what to do by the action they exhibit" comment do we really at this point have anything to be concerned about yet? Nope, just a down day for now.
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To our NEW SUBSCRIBERS
What we’ve tried to do is break our watch list down into chart pattern recognition structure from a visual standpoint. Learn the patterns and the components of patterns and you’ll blow those Wall Street MBAs away. You don’t need a $3,000 software program either. All you need is a BURNING DESIRE to be the best that you can be and we’re here to help.
We have a lot of new folks here and we thank you! We want you to take it easy, get to know how the routine works around here for awhile and to feel comfortable.
We hope you all aren’t here because you are chasing performance. For us it’s more about educating and making you the best you that you can be first (that’s what we focus upon!). Like many of our long time subscribers they have all found out that they have no use for traditional Wall Street (and we don’t blame them) and it’s our hope that over time you’ll have acquired enough knowledge from us to say the same with conviction.
One of the most important things we want to stress is that of RISK MANAGEMENT via POSITION SIZING. You don’t need to stack your account with just a few big positions as we’ve seen it time and time again that those who get into trouble are the ones who take large positions and do not employ any risk management system IE shoot for the fences. Those are the people who live on the fringes of extremes and yes ultimately get burned.
As a guideline a good initial system is that of the following example.
Let’s say you have a $100,000 virtual portfolio and let’s say that as a guide you never place more than 10% ($10,000) into any one position. Now let’s say that one day a news driven event hits (over which you have no control over anyway) and one of the positions tanks 20%. On its own that position is sporting a $2,000 loss, while that may seem devastating on its own its really no big deal overall.
Why? Simple its all about risk management being properly employed. What is the impact of a $2,000 loss to the TOTAL VALUE of the virtual portfolio in this example.
Answer: A whopping 2% LOSS. Now you know why we say no big deal.
We can also tell you new people here that you will get stopped out of names and you will take hits. There is nobody on the planet living that has ever hit 18 holes in one and there never will be. We’d rather get you grounded in reality right away vs talking about pie in the sky all the time like a lot of other sites. In so doing your head is screwed on straight from the start and when those days happen (and they will) mentally it won’t mean a thing to you. To us that’s what’s most important is YOUR state of mind as it’s your most important asset. We hope you appreciate our honesty.
We have a very good retention rate here at All About Trends and a lot of great outstanding people here. We like to think that a part of that is being upfront about what can happen (in both directions). Verses those up 500%, I turned $50,000 into $3 million or some other absurd number to get you to bite. That’s not who we are.
WELCOME ABOARD!
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Lastly with regards to taking any trade:
Remember the moment you take a trade you are at the mercy of the market and have no control except when to sell. If you are not willing to take the risk and are not willing to pay that price do not take the trade. We are willing to take that risk knowing full well the end result could be a loss. That said make sure that virtual portfolio management trade size is used accordingly. With any position you may take make sure that should something go awry the amount of total impact to your account does not devastate your acct. Try to stick to a 5% position That’s the key to virtual portfolio management, not biting off more than you can chew.
Remember the mechanics of reality with regards to the stock market states a stock can only do one of three things: Up, Down, Nowhere. The moment you hit the enter button you are at the mercy of the market therefore the only control you have is when to sell/cover. You can’t manage your gains as you have none to manage initially. Knowing this in advance it allows you to stay in outcome, that being you will either:
1. Make a gain
2. Wash
3. Get stopped out at a loss
Remember the market IS the boss. IT is going to do what IT wants to do.
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SUBSCRIBER ONLY WEB SITE
Don’t forget you can view updates in the middle and the end of each trading day complete with current charts, along with our current performance at our subscriber only web site.
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